Roberto Melendez v. David and Helen De Lemos

Opinion issued May 22, 2008

In The

Court of Appeals

For The

First District of Texas

NO. 01-07-00115-CV

ROBERTO MELENDEZ D/B/A HOU-TEX READY MIX CONCRETE &

MATERIALS, Appellant

V.

DAVID AND HELEN DE LEMOS, Appellees

On Appeal from the 189th District Court

Harris County, Texas

Trial Court Cause No. 2006-44449

MEMORANDUM OPINION

Appellant, Roberto Melendez, individually and d/b/a Hou-Tex Ready Mix

Concrete & Materials (Hou-Tex), appeals a traditional summary judgment and order

of severance in favor of appellees, David and Helen De Lemos. Hou-Tex sued the

De Lemoses personally, seeking payment for cement delivered to a construction site

on the order of a subcontractor to the general contractor hired by the De Lemoses to

construct a residence. In two points of error, Hou-Tex challenges the summary

judgment on the grounds that the trial court erred by refusing to compel arbitration

and by severing Hou-Tex's and the De Lemoses' claims from Hou-Tex's lawsuit

against their general contractor. We affirm.

Factual and Procedural Background

In October 2005, the De Lemoses entered into a written contract with Michael

Randel Homes, LLC (Randel Homes) to construct a new residence on the De

Lemoses' existing home site. Michael Landry signed the contract on behalf of Randel

Homes, and both David and Helen De Lemos signed the contract. The contract

identified the De Lemoses as owner and identified Randel Homes as contractor. The

terms of the contract included a provision by which these parties agreed (1) to address

construction-defect claims through the administrative procedures established by the

Texas Residential Construction Commission Act and (2) to waive jury trial because

all controversies, claims[,] or matters in question arising out of or

relating to (i) this Contract, (ii) any breach thereof, (iii) the construction

of the Residence, (iv) the sales transaction reflected in the Contract,

and/or (v) any representations or warranties, express or implied, relating

to the Property and/or the Residence (herein referred to collecting as a

"Dispute") shall be subject to binding arbitration .

(Emphasis added.) (1) Additional provisions of the contract afforded independent-contractor status to Randel Homes, to which the De Lemoses delegated all control

over scheduling and progress of the project by individual subcontractors. This

provision further specified that "All subcontractors shall perform their functions

independently, not as agent, employee, servant, or representative of the Contractor

or the Owner."

The original residence on the construction site was demolished in November

2005. In the course of construction of the new residence, Randel Homes, as general

contractor, hired a subcontractor to perform certain concrete services, who, in turn,

requested delivery of ready-mix concrete from Hou-Tex. On January 31, 2006, Hou-Tex delivered 150 yards of ready-mix concrete to the construction site and presented

an invoice for $11,772.19 to the subcontractor. The subcontractor issued a check to

Hou-Tex on February 3, 2006, but the check was dishonored and returned to Hou-Tex

for insufficient funds. In the meantime, the De Lemoses had been receiving notices

that some subcontractors hired by Randel Homes were not being paid. On April 3,

2006, the De Lemoses notified Randel Homes to stop construction of the new

residence, and Randel Homes abandoned the project. (2)

On May 10, 2006, Hou-Tex filed a notice of mechanics and materialmen's lien

against the De Lemoses' residence, who then filed this action as plaintiffs seeking to

remove the lien on the grounds that it was invalid for lack of compliance with several

provisions of the enabling statute, chapter 53 of the Property Code, which governs

mechanic's, contractor's, and materialmen's liens. (3) See Tex. Prop. Code Ann. §§

53.001 -.260 (Vernon 2007). Hou-Tex responded initially by asserting a quantum-meruit counterclaim for the ready-mix cement delivered to the De Lemoses' worksite,

but then added a counterclaim seeking to compel arbitration of its claim against the

De Lemoses based on the arbitration provisions of their contract with Randel Homes.

The De Lemoses filed two motions for traditional summary judgment. In their

first motion, they argued that they had no contract with Hou-Tex, that Hou-Tex had

released its lien on the same day that Hou-Tex filed its answer to the De Lemoses'

petition, that Hou-Tex could not recover against them in the absence of a perfected

lien or privity of contract, and that Hou-Tex's proper recourse was against Randel

Homes, because the De Lemoses had no personal liability to Hou-Tex. In response,

Hou-Tex filed an amended petition, which provided additional exhibits to support

Hou-Tex's initial claim for payment. In addition, Hou-Tex moved to abate, pending

arbitration of its claim against the De Lemoses, and filed a response and objection to

the De Lemoses' motion for summary judgment. Hou-Tex attached to its response

a copy of the contract between the De Lemoses and Randel Homes, an affidavit by

Roberto Melendez, and a copy of the deposition of Helen De Lemos.

Hou-Tex then filed its first amended answer, in which it asserted counterclaims

based on alternative theories against the De Lemoses, including accord and

satisfaction, estoppel, release, and failure of consideration, all of which Hou-Tex

premised on assertions that Helen De Lemos had promised to pay Hou-Tex's claim,

and that Hou-Tex had released its lien against the De Lemoses in exchange for that

promise. Hou-Tex also supplemented its quantum-meruit claim by claiming that the

De Lemoses had been unjustly enriched, had breached a contract to pay, and had not

complied with section 53.101 of the Property Code by retaining funds pending

construction. (4) In addition, Hou-Tex asserted a claim for declaratory relief to

determine its rights to arbitrate its claims under the arbitration provisions of the

contract between Randel Homes and the De Lemoses.

The De Lemoses answered these claims by general denial and the affirmative

defense that the statute of frauds barred Hou-Tex's claims for payment of a third-party debt. The De Lemoses responded to Hou-Tex's objections to their original

motion for summary judgment, but also filed an additional motion, seeking final

summary judgment as a matter of law on the following grounds: (1) the Hou-Tex lien

was invalid because it had not been properly perfected; (2) but the lien issue was

moot regardless because Hou-Tex had released the lien; (3) the De Lemoses were not

personally liable to Hou-Tex because (4) they had no contract with Hou-Tex, and (5)

they did not promise to pay Hou-Tex; (6) any alleged promise by the De Lemoses to

pay the Randel Homes debt was barred by the statute of frauds; and (7) Hou-Tex had

no cause of action for the De Lemoses' alleged failure to retain funds under the

Property Code because any obligation to retain ended 30 days after they terminated

their contract with Randel Homes, which had simultaneously abandoned construction,

and Hou-Tex did not assert its lien until after the 30 days had expired.

The trial court signed an interlocutory summary judgment order that dismissed

Hou-Tex's claims against the De Lemoses. Five days later, Hou-Tex sought leave to

add Randel Homes as a third-party defendant and necessary party to Hou-Tex's

invoking the arbitration clause of its contract with the De Lemoses. Afer the trial

court granted the requested leave, Hou-Tex filed a motion for leave to vacate the

summary judgment and or to compel mediation or arbitration. After conducting a

hearing, the trial court rendered summary judgment in favor of the De Lemoses by

ordering that Hou-Tex take nothing on its claims from them, pending severance of

those claims, and then severed those claims, thus rendering the summary judgment

final. See Diversified Fin. Sys., Inc. v. Hill, Heard, O'Neal, Gilstrap & Goetz, P.C. ,

63 S.W.3d 795, 795 (Tex. 2001) (citing Farmer v. Ben Keith Co. , 907 S.W.2d 495,

496 (Tex. 1995) ("As a rule, the severance of an interlocutory judgment into a

separate cause makes it final.")

Denial of Application to Compel Arbitration

Hou-Tex's first point of error challenges the trial court's refusal to compel

arbitration of its claims against the De Lemoses pursuant to the provisions of their

contract with Randel Homes. We first address preliminary issues concerning our

jurisdiction and the standard of review before proceeding to the merits of this issue.

A. Jurisdiction and Standard of Review

Because the trial court severed the issues between Hou-Tex and the De

Lemoses, thus rendering final the summary judgment rendered in favor of the De

Lemoses, our jurisdiction in this case derives from section 51.012 of the Civil

Practice and Remedies Code, which governs appeals from final judgments of district

and county courts. See Tex. Civ. Prac. & Rem. Code Ann. § 51.012 (Vernon 1997);

City of Dallas v. Jennings , 142 S.W.3d 310, 316 (Tex. 2004) ("A judgment that

finally disposes of all remaining parties and claims, based on the record in the case,

is final, regardless of its language.") (quoting Lehmann v. Har-Con Corp ., 39 S.W.3d

191, 200 (Tex. 2001)); cf. , Tex. Civ. Prac. & Rem. Code Ann. § 171.098 (a)(1)

(Vernon 2005) (authorizing interlocutory appeal of proceedings brought pursuant to

Texas Arbitration Act); In re Weekley Homes, L.P. , 180 S.W.3d 127, 130 (Tex. 2005)

(recognizing propriety of mandamus relief to enforce arbitration agreements governed

by Federal Arbitration Act).

We review summary judgments de novo pursuant to well-settled standards. See

Valence Operating Co. v. Dorsett , 164 S.W.3d 656, 661 (Tex. 2005). The party

seeking summary judgment under rule 166a(c) must demonstrate that there is no

genuine issue as to any material fact and that it is entitled to judgment as a matter of

law. Tex. R. Civ. P. 166a(c); Browning v. Prostok , 165 S.W.3d 336, 344 (Tex. 2005).

When, as here, the order granting summary judgment does not specify which of the

several grounds asserted formed the basis of the trial court's rendition, we may affirm

the summary judgment if any theory presented to the trial court and preserved for

appellate review is meritorious. See id. ; W. Inv., Inc. v. Urena , 162 S.W.3d 547, 550

(Tex. 2005). Therefore, the appealing party must generally demonstrate that none of

the proposed grounds is sufficient to support the judgment. See Star-Telegram, Inc.

v. Doe , 915 S.W.2d 471, 473 (Tex. 1995); Ellis v. Precision Engine Rebuilders, Inc .,

68 S.W.3d 894, 898 (Tex. App.--Houston [1st Dist.] 2002, no pet.).

When the appealing party does not challenge a ground on which the movant

sought summary judgment in the trial court, settled summary-judgment principles

demand that we affirm--without considering whether the summary judgment was

rendered properly or improperly on the unchallenged ground--given that we may not

reverse without properly assigned error. See Star-Telegram, Inc. , 915 S.W.2d at 473 ;

see also Malooly Bros., Inc. v. Napier , 461 S.W.2d 119, 121 (Tex. 1970) (affirming

summary judgment because "it may have been based on a ground not specifically

challenged" on appeal and "there was no general assignment that the trial court erred

in granting summary judgment.") (supporting citations omitted); Vawter v. Garvey ,

786 S.W.2d 263, 264 (Tex. 1990) (proscribing reversal of summary judgment without

properly assigned error); Wilchester W. Concerned Homeowners LDEF, Inc. v.

Wilchester W. Fund, Inc ., 177 S.W.3d 552, 563, 566 (Tex. App.--Houston [1st Dist.]

2005, pet. denied) (applying stated standard to affirm on unchallenged grounds).

Hou-Tex attacks only the trial court's having implicitly rejected Hou-Tex's

motion to compel arbitration. Hou-Tex does not challenge the summary judgment on

any of the six alternative grounds on which the De Lemoses relied. Had the trial

court granted Hou-Tex's motions to stay and to compel, arbitration would have

ensued, rather than rendition of summary judgment in favor of the De Lemoses. By

rendering summary judgment in favor of the De Lemoses, therefore, the trial court

ruled on the merits of their motion and necessarily, albeit impliedly, rejected Hou-Tex's motions to compel arbitration and to stay pending outcome of arbitration. We

therefore address this challenge to the summary judgment.

B. Whether Contract between De Lemoses and Randel Homes Compels

Arbitration of Claims by Nonsignatory Hou-Tex

1. General Principles

As the party attempting to compel arbitration, Hou-Tex had to establish at the

outset that its dispute falls within the scope of a valid arbitration agreement. See In re

Merrill Lynch Trust Co. , 235 S.W.3d 185, 187 (Tex. 2007); J.M. Davidson, Inc. v.

Webster , 128 S.W.3d 223, 227 (Tex. 2003). When, as here, the opponent objects to

arbitration, the trial court determines as a matter of law whether an agreement to

arbitrate exists. J.M. Davidson, Inc. v. Webster , 128 S.W.3d 223, 227 . This is a

question of state contract law that we review de novo. See In re Merrill Lynch , 235

S.W.3d at 187 ; J.M. Davidson , 128 S.W.3d at 227 (citing First Options of Chicago,

Inc. v. Kaplan , 514 U.S. 938, 944 , 115 S. Ct. 1920, 1924 (1995) (holding that courts

"generally . . . should apply ordinary state-law principles that govern the formation of

contracts" in determining whether parties have agreed to arbitrate)).

If the parties have agreed, and if the agreement encompasses the dispute, then

the law favors arbitration. In re Merrill Lynch , 235 S.W.3d at 187 . But the parties

must have agreed. See id. at 192 . Arbitration agreements are thus "'as enforceable as

other contracts'"; they are not, however, "'more'" enforceable than other contracts. Id.

(quoting Prima Paint Corp. v. Flood & Conklin Mfg. Co. , 388 U.S. 395 , 404 n.12, 87

S. Ct. 1801 , 1806 n.12 (1967)). "[U]nder both Texas and federal law, arbitrability turns

on the substance of a claim, not artful pleading." Id. at 190. The dispositive inquiry

then, is whether the parties have agreed to arbitration: if they have not, no trial court

has discretion to compel that they arbitrate; if they have, no trial court has discretion

"to let one wriggle out." Id. at 193.

It is undisputed that Hou-Tex is neither a signatory nor party to the contract

between the De Lemoses and Randel Homes. Nonsignatories, or "nonparties," to an

agreement containing an arbitration clause may be bound by the provisions of the

clause "when the rules of law or equity would bind them to the contract generally." In

re Weekley Homes , 180 S.W.3d at 129 . Federal arbitration law recognizes several

theories of contract and agency law that authorize binding a nonsignatory to an

arbitration agreement. See In re Kellogg Brown & Root, Inc. , 166 S.W.3d 732, 739

(Tex. 2005). For a nonsignatory like Hou-Tex, a "contract theory" must tie the

nonsignatory to the arbitration provisions sought to be enforced. See In re Merrill

Lynch , 235 S.W.3d at 187, 194 . Hou-Tex's contentions in this case invoke the two

following, contract-based theories in seeking to compel arbitration with the De

Lemoses: that the De Lemoses were equitably estopped from contesting applicability

of the arbitration clause in its contract with Randel Homes to Hou-Tex's claims, or,

alternatively, that Hou-Tex was a third-party beneficiary of that contract. See id . at 193

(addressing equitable estoppel theory of enforcement); In re Palm Harbor Homes, Inc. ,

195 S.W.3d 672, 677 (Tex. 2006) (addressing third-party beneficiary theory of

enforcement).

2. Equitable, or "Direct Benefits," Estoppel

Hou-Tex contends that the De Lemoses cannot deny, as against Hou-Tex, the

enforceability of the arbitration clause in their agreement with Randel Homes. When

a nonsignatory to a contract that contains an arbitration provision sues on the contract

and seeks a direct benefit from the contract, but claims that the arbitration provision

does not apply, the nonsignatory is estopped to deny enforceability of the arbitration

provision of the contract that the signatory seeks to enforce. See In re U.S. Home

Corp ., 236 S.W.3d 761, 765 (Tex. 2007); In re Merrill Lynch , 235 S.W.3d at 192 ; In

re Weekley Homes , 180 S.W.3d at 131-32 ; In re Kellogg Brown & Root , 166 S.W.3d

at 739 ; see also Meyer v. WMCO-GP, LLC , 211 S.W.3d 302, 307 (Tex. 2006) ("When

a party's right to recover and its damages depend on the agreement containing the

arbitration provision, the party is relying on the agreement for its claims."); In re

FirstMerit Bank , 52 S.W.3d 749, 755 (Tex. 2001) (holding that a litigant who sues

based on a contract subjects himself to the contract's terms ).

The preceding cases, which bound a nonsignatory to an arbitration clause

contained in the contract based on the doctrine of direct-benefits estoppel, are not

applicable here. The supreme court does not apply direct-benefits estoppel when the

claimed benefits are "insubstantial" or "indirect." In re Weekley Homes , 180 S.W.3d

at 134 . Neither does the doctrine apply to bind a nonsignatory to a contract with an

arbitration provision if the claim merely "relates" to the contract. In re Kellogg Brown

& Root, Inc ., 166 S.W.3d at 741 . Claims by a nonsignatory that "can stand

independently of the underlying contract" should generally not be arbitrated. Id . at

739-40.

In Kellogg Brown & Root , a signatory to a fabrication contract containing an

arbitration clause sought to compel Kellogg, Brown & Root (KBR) to arbitrate its

quantum meruit claim against that party, on the grounds that KBR's claims for "labor

and services were linked inextricably" to the fabrication contract. Id . at 740. Because

KBR provided its labor and services pursuant to a different contract and sought its

benefits from that contract, and thus sought no benefit from the fabrication contract,

the supreme court rejected the claimant's reliance on the doctrine of direct-benefit

estoppel in seeking to compel KBR to arbitrate its claim. Id. at 741 .

The same analysis defeats Hou-Tex's reliance on the doctrine in this case.

Despite the tangential relationship between Hou-Tex's quantum meruit claims to the

construction contract between Randel Homes and the De Lemoses, Hou-Tex claims no

direct benefit under that contract--beyond its arbitration clause. Much like the

fabrication contract in Kellogg Brown & Root , see id. , the contract here disclaimed any

"agent, employee, servant, or representative" relationship between any subcontractors,

like Hou-Tex, and either Randel Homes or the De Lemoses and further identified all

subcontractors as independent contractors. The benefit Hou-Tex seeks through its

quantum meruit claims in this case, like the benefits KBR sought in Kellogg Brown &

Root , seek payment for services rendered pursuant to a different contract, specifically,

Hou-Tex's contract with the subcontractor that requested delivery of the cement mix

and later defaulted on payment. See id. That obligation stands alone and is, therefore,

separate from the De Lemoses' construction contract with Randel Homes, as that

contract expressly states. See id . Hou-Tex's claims deriving from chapter 53 of the

Property Code likewise stand alone and seek no benefit from the De Lemoses' contract

with Randel Homes. See id.

For these reasons, we hold that the trial court's implied rejection of Hou-Tex's

equitable estoppel claims asserted against the De Lemoses was correct as a matter of

law, and, therefore, that the trial court properly rejected Hou-Tex's motions to compel

and to stay arbitration in rendering summary judgment for the De Lemoses.

3. Third-Party Beneficiary

A stranger to a contract may enforce the contract as a third-party beneficiary if

the parties to the contract intended to secure a benefit to that third party and entered

into the contract directly for the third party's benefit. In re Palm Harbor Homes, Inc .,

195 S.W.3d at 677 (citing Stine v. Stewart , 80 S.W.3d 586, 589 (Tex. 2002); MCI

Telecomms. Corp. v. Tex. Utils. Elec. Co. , 995 S.W.2d 647, 651 (Tex. 1999)). The

third party in Palm Harbor Homes sought to compel arbitration on the grounds that the

agreement inured to the benefit of the manufacturer of the home in question. Id. By

the express terms of the agreement, therefore, the parties to the agreement entered into

it, at least in part, directly for the third party manufacturer's benefit, who properly

claimed third-party beneficiary status. See id.

In contrast, nothing in the construction contract between the De Lemoses and

Randel Homes in this case can be construed to inure to Hou-Tex's benefit. Indeed, as

addressed above, that contract disclaims any "agent, employee, servant, or

representative" relationship on which a third-party beneficiary claim might be

premised. We therefore hold that the trial court's implied rejection of Hou-Tex's third-party beneficiary contentions asserted against the De Lemoses was correct as a matter

of law, and, therefore, that the trial court properly rejected Hou-Tex's motions to

compel and to stay arbitration in rendering summary judgment for the De Lemoses .

We overrule Hou-Tex's first point of error.

Severance

Hou-Tex's second point of error purports to challenge rendition of summary

judgment in favor of the De Lemoses on the narrow ground that they are "necessary

parties" to resolution of its dispute, by virtue of the trial court's having granted Hou-Tex leave to add Randel Homes as a third-party defendant. Hou-Tex provides neither

authorities nor citations to the record to support its contentions, as required by Tex. R.

App. P. 38.1(h), and has therefore waived any error. Holloway-Houston, Inc. v. Gulf

Coast Bank & Trust Co. , 224 S.W.3d 353 , 361 n.3 (Tex. App.--Houston [1st Dist.]

2006, no pet.).

We overrule Hou-Tex's second point of error.

Conclusion

We affirm the judgment of the trial court.

Sherry Radack

Chief Justice

Panel consists of Chief Justice Radack and Justices Alcala and Bland.

1. Other provisions of this "arbitration clause" required that the owner and contractor

attempt to resolve their dispute "through informal discussions" and to submit the

dispute to non-binding mediation. Binding arbitration, however, was owner's and

contractor's final recourse.

2. The De Lemoses later negotiated with a different contractor to complete construction

of the new residence.

3. It is undisputed that Hou-Tex filed its mechanic's and materialmen's lien more than

30 days after Randel Homes abandoned the construction contract and, thus, after the

deadline imposed by section 53.103(2) of the Property Code.

See Tex. Prop. Code

Ann. § 53.103 (2) (Vernon 2007).

4. See Tex. Prop. Code Ann. § 53.101 (Vernon 2007).